United Kingdom and the euro
The United Kingdom did not seek to adopt the euro as its official currency for the duration of its membership of the European Union (EU), and secured an opt-out at the euro's creation via the Maastricht Treaty in 1992. Opinion polls in the UK showed that the majority of British people were against adopting the euro, and in a June 2016 referendum the UK voted to withdraw from the EU which would virtually eliminate the chance of any future adoption. On 31 January 2020 at 23:00 GMT the UK left the EU. Despite never being a member of the eurozone, the currency is used in the UK's Cypriot territories and as a secondary currency in Gibraltar; furthermore, London is home to the majority of the euro's clearing houses. History The United Kingdom entered the European Exchange Rate Mechanism, a prerequisite for adopting the euro, in October 1990. The UK spent over £6 billion trying to keep its currency, the pound sterling, within the narrow limits prescribed by ERM, but was forced to exit the programme within two years after the pound sterling came under major pressure from currency speculators. The ensuing crash of 16 September 1992 was subsequently dubbed "Black Wednesday". During the negotiations of the Maastricht Treaty of 1992 the UK secured an opt-out from adopting the euro. The government of former Prime Minister Tony Blair declared that "five economic tests" must be passed before the government could recommend the UK joining the euro and promised to hold a referendum on membership if those five economic tests were met. The UK would also have to meet the EU's economic convergence criteria (Maastricht criteria), before being allowed to adopt the euro. Currently, the UK's annual government deficit to the GDP is above the defined threshold. The government committed itself to a triple-approval procedure before joining the eurozone, involving approval by the Cabinet, Parliament, and the electorate in a referendum. Gordon Brown, Blair's successor, ruled out membership in 2007, saying that the decision not to join had been right for Britain and for Europe. In December 2008, José Barroso, the President of the European Commission, told French radio that some British politicians were considering the move because of the effects of the global credit crisis. EUobserver - Britain closer to euro, Barroso says The office of the Prime Minister, Gordon Brown, denied that there was any change in official policy.AFP - Britain says no change on euro after EU chief's claim In February 2009, Monetary Policy Affairs Commissioner Joaquín Almunia said "The chance that the British pound sterling will join: high." In the UK general election 2010, the Liberal Democrats increased their share of the vote, but lost seats. One of their aims was to see the UK rejoining ERM II and eventually joining the euro, but when a coalition was formed between the Liberal Democrats and the Conservatives, the Liberal Democrats agreed that the UK would not join the euro during this term of government. The United Kingdom, an EU member state, has not replaced its currency, the pound sterling with the common euro currency. The pound sterling does not participate in the European Exchange Rate Mechanism, a prerequisite for euro adoption. The UK negotiated an opt-out from the part of the Maastricht Treaty of 1992 that would have required it to adopt the common currency, and the Conservative-Liberal Democrat coalition government that was elected in May 2010 pledged not to adopt the euro as its currency for the lifetime of the parliament.BBC News 'David Cameron and Nick Clegg pledge 'united' coalition' Polls have shown that the majority of British people are against adopting the euro. In a June 2016 referendum the UK voted to withdraw from the EU, which if enacted would end any lingering discussion of it adopting the euro. Withdrawal may also negatively impact London's position as a hub for euro clearing. At that time, some shops in Northern Ireland accepted the euro at its parity, causing a large influx of shoppers from the Irish border. This made some shops the most successful within a few weeks. Alex Salmond had called for more Scottish businesses to accept the euro to encourage tourism around the eurozone, which is already done like Historic Scotland. Sterling zone If the United Kingdom were to join the eurozone, this would affect the Crown dependencies and some British overseas territories that also use the pound sterling, or which have a currency on a par with sterling. In the Crown Dependencies, the Isle of Man, Jersey, Guernsey, and Alderney pounds all share the ISO 4217 code GBP. In the British Overseas Territories, the Gibraltar, Falkland Islands, British Indian Ocean Territory and Saint Helena pounds are also fixed so that £1 in the local currency equals £1 in sterling. The British Antarctic Territory and South Georgia and the South Sandwich Islands do not have their own currencies and use the pound sterling. When France adopted the euro, so did the French overseas departments and territories that used the French franc. The CFP franc, the CFA franc and the Comorian franc, that are used in overseas territories and some African countries, had fixed exchange rates with the French franc, but not at par – for various historical reasons they were worth considerably less, at 1 French franc = 18.2 CFP francs, 75 Comorian francs or 100 CFA francs. The CFA franc and the Comorian franc are linked to the euro at fixed rates with free convertibility maintained at the expense of the French Treasury. The CFP franc is linked to the euro at a fixed rate. It has been suggested that the sterling zone territories would, in the event of the UK adopting the euro, have four options: * Enter the eurozone as a non-EU member and issue a distinct national variant of the euro—just as Monaco and the Vatican have done. The EU has only allowed sovereign states to adopt this approach to date. Also, it has demanded that monetary agreements be entered into by non-EU members who wish to issue their own euro coinage, and has prevented Andorra from issuing their own coins until this is resolved. Such agreements, the EU has stated, must include adherence to EU banking and finance regulation. * Use standard euro coins issued by the UK and other eurozone countries. This may be perceived by some as losing an important symbol of independence. * Maintain their existing currency, but peg at a fixed rate with the euro. Maintaining a fixed rate against currency speculators can be extremely expensive, as the UK found on Black Wednesday. However, if the UK supports the retention of the fixed rates of these small currencies, it would be so trustworthy that no speculation would take place. * Adopt a free-floating currency, or a currency fixed to another currency, as the Jersey government has hinted. Gibraltar is in a different position, as it is within the EU (as part of the UK's membership). If the UK were to adopt the euro it might not be possible to implement an opt-out for Gibraltar. It is unclear whether Gibraltar would be subject to its own referendum or would be included in a UK referendum: Gibraltar votes as a part of the UK in European parliamentary elections.